Air Cargo Newsdesk

How trade tensions will disrupt global supply chains

GLOBAL economic growth is projected to soften from a downwardly revised three per cent in 2018 – to 2.9 per cent in 2019, the World Bank reveals.

International trade and manufacturing activity have softened, trade tensions remain elevated, and some large emerging markets have experienced substantial financial market pressures, asserts a corporate statement from the organisation, writes Thelma Etim.

Growth among advanced economies is forecast to drop to two per cent this year, its January 2019 Global Economic Prospects report, says.

Slowing external demand, rising borrowing costs, and persistent policy uncertainties are expected to weigh on the outlook for emerging market and developing economies. Growth for this group is anticipated to hold steady at a weaker than expected 4.2 per cent this year.

Amidst this, the upswing in commodity exporters has stagnated, while activity in commodity importers is also decelerating.

Intensifying trade tensions could result in weaker global growth and disrupt globally interconnected value chains and this will have a knock on effect on the air cargo industry.

The news corroborates the International Air Transport Association’s (IATA) data for global airfreight markets in November 2018, which shows that demand, measured in freight tonne kilometres (FTKs), was flat (0 per cent) in comparison with the same period the year before. This was the slowest rate of growth recorded since March 2016, following 31 consecutive months of year-on-year increases, notes the airline association.

Freight capacity, measured in available freight tonne kilometres (AFTKs), rose by 4.3 per cent year-on-year in November 2018, says IATA. This is the ninth month in a row that capacity growth outstripped demand, IATA adds.

Overall, air cargo demand faced ‘significant headwinds’, including signs of weakness in global economic activity; a contraction in export order books in all major exporting nations, with the exception of the USA; shorter supplier delivery times in Asia and Europe; and weakened consumer confidence compared to very high levels at the beginning of 2018.